"What Politicians Want Is A World Of Pure Beta And Zero Alpha"

Mr. Incredible: You mean you killed off real heroes so that you could *pretend* to be one?

Syndrome: Oh, I'm real. Real enough to defeat you! And I did it without your precious gifts, your oh-so-special powers. I'll give them heroics. I'll give them the most spectacular heroics the world has ever seen! And when I'm old and I've had my fun, I'll sell my inventions so that *everyone* can have powers. *Everyone* can be super! And when everyone's super ... [chuckles evilly] … no one will be.

When I played pro football, I never set out to hurt anyone deliberately - unless it was, you know, important, like a league game or something.

– Dick Butkus, Chicago Bears (1965 – 1973)

Fortunately for a quarterback, you can play for a long time because you don’t get hit very often.

– Tom Brady, New England Patriots (2000 – ???)

Earlier this month, Massachusetts State Secretary William Galvin imposed a $30 million fine on Citigroup because an equity analyst shared his research on an Apple iPhone supplier with analysts at a couple of investment funds before he published the research publicly. To be clear, this was not a case of the analyst telling the hedge funds his true views and writing fraudulent pieces for public consumption, à la Merrill Lynch analyst Henry Blodgett and many others, which resulted in the 2003 Global Research Analyst Settlement between the SEC and most Wall Street sell-side firms, as well as the launching of Eliot Spitzer’s political career. Nor was this a case of the analyst leaking inside information from the company he covered to the hedge funds, à la some of the protagonists in the Galleon Group prosecutions that began in 2009. This was the analyst’s own work and research, perfectly aligned with what he would publish publicly. But because Citigroup is a party to the 2003 Global Research Analyst Settlement, whereby “CIR [Citigroup Research] equity research analysts cannot preview in writing unpublished, or disavow in writing published research views to personnel outside of CIR”, the analyst was a dead man walking as soon as he emailed his “New Forecast” numbers to external analysts.

This is the same issue that tripped up prominent equity analyst Mark Mahaney (also of Citigroup) in October last year, when he emailed a reporter in a way that indicated his unpublished projections of YouTube’s revenue growth and profitability. Again, no disconnect between public and private communications and no revelation of inside information, but a clear violation of both the 2003 consent decree and bank policy, for which Mahaney was summarily fired. As he should have been. It’s not like Mahaney was unaware of the prohibition against this sort of communication (as he wrote in an email later cited by the bank, “This could get me in trouble. Shoot.”), and it’s pretty clear that the analyst in this week’s case was similarly aware of the rules, seeing as he rushed the published report out the door immediately after emailing the hedge funds.

My point is not that these guys were treated unfairly or that sell-side equity research rules should be changed back to their pre-2003 form. These are the rules of the game today, everyone knows that these are the rules, and if you don’t want to play within these rules you should find another game.

Let me put it this way … Do you enjoy seeing a defensive back level a wide receiver with a big hit? Are you annoyed by your team’s defensive lineman being flagged for roughing the passer if he lays a fingernail on pretty boy Tom Brady? Me, too.

But the game of football as played by Dick Butkus is gone. It’s not coming back. Get over it. Certainly the NFL players and coaches have gotten over it, because they have to deal with the game as it is – not as it was or how they wish it were – in order to succeed. Ditto for baseball. Is it completely arbitrary to make a distinction between “illegal” performance-enhancing regimens like a course of anabolic steroids and “legal” performance-enhancing regimens like Lasix surgery or tendon replacement? Of course it is. But there’s nothing “natural” about any choices a rule-making organization might impose. Any game is defined by the rules in force, explicitly and tacitly, at a given point in time. If you want to play in that game, you play by that set of unnatural rules and not some other set of unnatural rules. Period. Nostalgia is a luxury for observers, not participants, whether you’re talking about the game of sports or the game of thrones or the game of markets.

My point (other than to say “For the love of God, don’t use email when the law specifically enjoins only written communications”) is that the rules governing the flow of private information within capital markets – and the way those rules are enforced – create structural changes in markets. Those structural changes, in turn, shape not only investor behavior but also investment returns. Alpha generation in public equity markets has been crippled by the current regulatory regime, which is engaged in an intentional effort to criminalize private information regarding public companies. This is an institutionalized effort to “level the playing field” as every U.S. Attorney and Senator and President and Attorney General and Governor likes to say. This is not a Democratic or Republican effort. It is an entirely natural and rational effort by any politician in the aftermath of a nationwide economic crisis. It is an effort that will not go away and will in all likelihood get more pronounced. The rules of the game are changing, and if you don’t change the way you play the game to match these new rules, you will be bounced out of the game as fast as Butkus would be if he played football today.

I’m not concerned with the public theatre of all this. There are show trials in the aftermath of every lost war, and the aggregate cost of the Great Recession to the US economy was the rough equivalent of losing a decent-sized war. No one is going to shed a tear over Raj Rajaratnam or Stevie Cohen or their ilk, so let the perp walks and the ritual executions begin. Certainly it’s a little comical at times. How many shots did the photographer have to take of US Attorney Preet Bharara before his media handlers decided that he evinced just the right degree of steely determination as he gazes out the window with the DOJ seal in the background?

On the other hand, here’s a photograph of the seven monitors that Stevie Cohen keeps on his desk at SAC.

In their response to the SEC “failure to supervise” charge against SAC, Cohen’s lawyers actually make the argument that having so many monitors proves that Cohen could not possibly have been paying attention to the incriminating emails sent to him, that in fact this is prima facie evidence that Cohen is a trader extraordinaire, a wizard who made his billions by keeping his finger on the beating pulse of the market. Maybe the only thing funnier than the lawyers’ argument was the way in which the news was picked up by The Wall Street Job Report, with an article titled “Steve Cohen has seven monitors at his desk. Should you, too?” Conclusion: seven is probably “excessive”, although “multiple studies suggest that having a second or third screen makes workers more productive.” I mean, you just can’t make this stuff up.

But the real issue here is not the show trials. The real issue is the regulatory evisceration of the day-to-day process by which investment managers and analysts acquire information about public companies.

Galvin is not stopping with the $30 million fine of Citigroup. He is “looking at whether there are other enforcement actions possible” against SAC, Citadel, GLG, and T. Rowe Price for asking the question about the Citigroup analyst’s views on the iPhone supply chain. In particular, Galvin called SAC’s efforts “extremely aggressive” and is considering whether to hand over his evidence to federal prosecutors and the SEC. Well, this certainly sounds interesting, so I went through the Massachusetts complaint to see just what sort of hardball tactics SAC employed. Here you go:

44. On the morning of Dec. 13, 2012, an employee of SAC Capital, a CGMI client holding Apple stock, began emailing Kevin Chang, asking “Hey Kevin, are you picking up any order cuts to iPhone?”

45. Also on the morning of Dec. 13, 2012, an employee of SAC Capital’s CR Intrinsic division emailed Kevin Chang, asking “Hi Kevin, Macquarie just downgraded Hon Hai and cited very weak demand for the iPhone (down 35-40%) into the March qtr. Have you picked up any checks that would suggest this is the case? I think when we exchanged emails a bit earlier you were still pretty bullish about March estimates? Thanks!”

46. Also on the morning of Dec.13, 2012, an employee of SAC Capital’s LP division emailed Kevin Chang, asking “Hello Kevin, do you have some time to speak? Not sure if you are in Taiwan?”

47. Also on the morning of Dec. 13, 2012, an employee of SAC Capital’s Sigma Capital division emailed Kevin Chang, asking “A competitor had a negi note on HH today. I was wondering if you had a few minutes tonight (ET), am for you, to catch up on your general thoughts.”

48. On Dec. 13, 2012, prior to the publication of Kevin Chang’s Dec. 14 Hon Hai Report, another employee of the hedge fund emailed Kevin Chang, copying a Citi Equities employee, with the subject of the email as “[Employee Name] at SAC request for conference call today URGENT.”

49. In this email chain, the SAC employee asked, “Kevin are you available?” The Citi Equities employee replied to this chain, asking, “Kevin, have been told this morning that you are in Japan. Is there a possibility of calling [the hedge fund employee] on his mobile number at [U.S. phone number] or in his office at [U.S. phone number]. Any help is greatly appreciated.” Lastly the employee of the hedge fund replied to both Kevin Chang and the Citi Equities employee, stating, “Thanks very much – mobile is best at [U.S. phone number].”

That’s it. Pretty ferocious, huh? Only two of the five emails said thank you, which struck me as terribly impolite and just the sort of aggressive, take-no-prisoners behavior that SAC is so well-known for. And I think we’re all aware that when a SAC analyst says “I was wondering if you had a few minutes to catch up on your general thoughts?” that’s code for “we are holding your wife and kids hostage.”

Are there rules for what sell-side analysts can say and when they can say it? Yes, if your firm is in the business of selling or marketing securities and particularly if your firm is governed by the 2003 general consent decree. What Galvin is suggesting is that there should also be rules for what the buy-side can ask and when they can ask it, or at least that there should be a burden placed on the buy-side to confirm that they are not receiving or acting on information “illegally” provided by a sell-side analyst. That legal burden already exists if an investor receives material and non-public information about a publicly-traded company from anyone, including sell-side analysts. This is the current definition of insider trading. What’s germinating here is an expansion of the definition of insider trading to include material and non-public opinions developed by an employee of a regulated broker dealer. That may sound like a minor thing, but I can promise you that it’s not.

If we are entering a regulatory environment where the questions posed by these SAC analysts will be characterized as criminal behavior, then any active investment strategy based on the fundamental analysis of companies is finished. Dead. This is the mother of all chilling effects. Asking these questions is what fundamental analysts DO … all day, every day. They call and email and visit sell-side analysts a lot, management (usually someone in investor relations) occasionally, and each other rarely. This is how a buy-side analyst “knows his companies”. This is how a stock-picking investment strategy develops an “edge”. If coming into possession of a sell-side analyst’s opinion might land you in jail … if every investor must not only ask “is this opinion right?”, but also “is it legal for me to have this opinion?” … well, these conversations will stop happening. We will all read the same research reports at the same time, get on the same conference calls, attend the same publicly broadcast meetings. We will receive these opinions legally, which is to say publicly, and everyone will know exactly the same things at exactly the same time about public companies directly, as well as what everyone on the sell-side thinks about those public companies. No investor will “know his companies” any better than the next guy, which means there will be no edge to any stock-picking investment strategy. Which means that there is no alpha in these strategies. Sorry, but that’s a cold, hard fact.

Here’s the thing. This is exactly what politicians want from their regulatory efforts. They want a world of pure beta and zero alpha. This is the ultimate “level playing field”, where no one knows anything that everyone else doesn’t also know. The presumption within regulatory bodies today is that you must be cheating if you are generating alpha. How’s that? Alpha generation requires private information. Private information, however acquired, is defined as insider information. Insider information is cheating. Thus, alpha generation is cheating. QED.

Why would politicians want an alpha-free market? Because a “fair” market with a “level playing field” is an enormously popular Narrative for every US Attorney who wants to be Attorney General, every Attorney General who wants to be Governor, and every Governor who wants to be President … which is to say all US Attorneys and all Attorneys General and all Governors. Because criminalizing private information in public markets ensures a steady stream of rich criminals for show trials in the future. Because the political stability of the American regime depends on a widely dispersed, non-zero-sum price appreciation of all financial assets – beta – not the concentrated, zero-sum price appreciation of idiosyncratic securities. Because public confidence in the government’s control of public institutions like the market must be restored at all costs, even if that confidence is misplaced and even if the side-effects of that restoration are immense. Here’s a telling quote:

Insider trading tells everybody at precisely the wrong time that everything is rigged, and only people who have a billion dollars and have access to and are best friends with people who are on boards of directors of major companies – they’re the only ones who can make a true buck.

– Preet Bharara, U.S. Attorney for the Southern District of New York

What does that mean, that it’s “precisely the wrong time” for insider trading to exist? Why isn’t insider trading an equally bad thing anytime? It’s precisely the wrong time because the financial collapse of 2008 and the subsequent federal bail-out of everyone from AIG to GM to GE to Goldman Sachs revealed that the system IS rigged. Now I think that anyone with half a brain should thank God that the system is rigged, because the alternative was a good old-fashioned Götterdämmerung, but it’s pretty hard to deny that the events of 2008 – 2009 revealed the raw sinews of power that exist beneath our pleasing Narrative of democratic rule and a “level playing field”. Now the Narrative must be restored. We’ve seen the iron fist … time to put the velvet glove back on. There is no more important task for the American regime.

Fortunately for Bharara and unfortunately for active equity managers, there are tools available to regulators and prosecutors today that were not available in, say, the 1930’s to enforce an alpha-free market. These are the tools of Big Data and electronic surveillance, and as we have seen with recent revelations around the NSA and its collection and analysis of all US telecommunications, it is a powerful toolkit, indeed. On the Big Data side, in 2009 the SEC established an Office of Quantitative Research and an Office of Risk Assessment and Interactive Data within its Economic and Risk Analysis Division, and – for operational surveillance – an Office of Analytics and Research within its Trading and Markets Division. Just this July, the SEC announced a new Center for Risk and Quantitative Analysis, which will directly “provide guidance to the Enforcement Division’s leadership.” This is the SEC’s equivalent of the CIA. These Offices are extremely well funded, draw some really top-notch people from the private sector, and coordinate closely with the FBI. Today’s SEC may not quite be the functional equivalent of the NSA from a data gathering and pattern inference perspective, but it’s nothing to sneeze at, either. The NSA is a little bigger and faster, that’s all. On the traditional surveillance side, Bharara and his colleagues in the DOJ have been given amazing latitude by the courts to pursue widespread wire taps across a wide swath of the financial services industry.

The importance of these surveillance and data analysis capabilities cannot be overemphasized, as they transformed sleepy regulatory edicts that were on the books but extremely hard to prosecute – such as the 2003 Global Research Analyst Settlement or, more importantly, Reg FD, originally adopted way back in August, 2000 – into powerful weapons. Take, for example, Reg FD, which requires publicly traded companies to eliminate selective disclosure of any information that could be deemed to be material and non-public. Not only does Reg FD place a burden on company management not to disclose material and non-public information to anyone unless it is disclosed to everyone, but as described above it also places a burden on the receiving party (typically the investor) not to act on the improperly disclosed information. Prior to 2009 it was very difficult for the SEC or FBI to identify any but the most egregious infractions of Reg FD, such as an email leaked by a disgruntled employee or a massive dumping or purchase of a stock. Since 2009, however, the SEC can sift through all of the trading in a company’s stock, look for what they consider to be suspicious patterns (i.e., alpha generation), and then work backwards to create a link with, say, a 1-on-1 meeting at a sell-side conference between the company’s CFO and an analyst from the trading firm. As a result, company management today is extremely tightlipped, not just on the obvious topics such as quarterly earnings or some other business metric, but on anything other than what has been very publicly disclosed. Before 2009 you could almost always get a read on the “body language” of senior management, the overall behavioral equivalent of a wink or nod to the general business conditions facing the company. Those days are gone, and that makes the stock-picker’s job – particularly at really large asset managers – so much harder.

Why is the loss of body language and other seemingly generic signaling so important? Because there’s only one question you truly need answered if you’re a good stock-picker who has done his homework on a company. That question is NOT “what are your earnings going to be this quarter?” or “how are gross margins looking?” or “did you hit your revenue guidance?” The only question that really matters is what Laurence Olivier’s Nazi dentist asked Dustin Hoffman in The Marathon Man: Is it safe?

If you’ve never seen The Marathon Man … well, let’s just say that you may never have the same level of comfort in the dentist’s chair after watching it. Olivier needs to know if his transit route for a shipment of diamonds has been blown – Is it safe? – and he believes that Hoffman knows the answer. Hoffman doesn’t, but that doesn’t stop Olivier from torturing Hoffman in ways that only a skilled Nazi dentist could devise.

Fortunately for senior company management, institutional investors may be annoying, but they are rarely torture experts. The question, though, is identical. Put yourself in the CEO’s shoes. A big fund has had a position in your stock for a couple of years. They’ve done their work and they have a positive, long-term investment opinion. They don’t need you to confirm their investment opinion in every detail (although that would certainly be nice if you were so inclined), and they’re patient investors. You’ve gotten to know them over time, and while you wouldn’t call them friends you’ve developed something of a warm familiarity and more than a little mutual trust. They’re on your side. Now you’re on a private call or at a conference 1-on-1 meeting, and the CIO of the fund tells you that they are planning on turning their current position into a very large position. He has only one question. Is it safe?

Before Reg FD you told the CIO everything he wanted to know. Not just whether it was safe, but all the degrees of safeness and what the fund should look for to see how that safety developed. After Reg FD in 2000 but before the 2009 SEC jihad you still felt pretty comfortable communicating an answer with a hem and a haw, maybe a reference to a prior period in the company’s history or a generic expression of caution or excitement … body language. Today you duck the conversation entirely and have the IR VP sit in for you. You have large group meetings with lots of people in the room. You say nothing that has not already been said, word for word, in a 10-Q or an 8-K filing.

Now put yourself in the CIO’s shoes. You still have to take big swings with your portfolio, both because you’ve got a lot of money to put to work and you have to distinguish yourself against your benchmark. Maybe you can seek safety in the consensual validation of other managers, a Common Knowledge answer to the “Is it safe?” question, which is why there is such a pronounced herding behavior among active managers today in stocks like Apple. Or maybe you move towards an activist strategy, where you can once again acquire private information about a company and influence management directly, albeit at the significant risk of locking yourself into an investment you cannot easily exit. The bottom line is that without an answer to the “Is it safe?” question you’ve got less private information and more risk for the same reward.

Over time and across the population of active investment managers, more risk for the same reward translates directly into less alpha. Such is the “level playing field” of full disclosure, a structural shift in market rules that will persist no matter what happens to corporate earnings or Fed monetary policy.

In future notes I’ll explore the portfolio and risk management implications of these changing rules. Is alpha even possible under these new rules? I believe it is, but not through the old lenses, or at least not easily. Alpha still depends on private information, and I intend to look for that private information through the lens of behavioral patterns, not through the traditional lens of company-specific information or opinions. I hope you’ll join me in that search at Follow Epsilon Theory.

If we are entering a regulatory environment where the questions posed by
these SAC analysts will be characterized as criminal behavior, then any
active investment strategy based on the fundamental analysis of
companies is finished. Dead.

If?

Entering?

Will be?

lol

Fri, 09/03/2010 - 11:41

Fundamental analysis? Earnings? Technical analysis? Charts? We
don't have a prayer when Ben has his finger on the button under the
table.

You can take the ghosts of Graham, Dodd, Edwards, and McGee, as well
as every CFA on the planet to manage a portfolio. I'll take one insider
at 33 Liberty and my performance will wipe the men's room floor with
your's.

There's a difference between buying an equity index during a bull market and getting consistent returns over a long period of time. The investment returns of professional money managers that zerohedgers synically characterize as "beta" will sustain themselves even when equities underperform because professional money managers deliver superior risk to reward ratios, which doesn't necessarily mean superior returns in the short term.

Hey I've got an idea. What if we created a highly elaborated regulatory environment, with confusing and contradictory rules that encourage selective enforcement, or at the very least, require gigantic teams of lawyers to navigate. What if that created a separate--nay, privileged-- class of politically connected and/or wealthy people and corporations who gradually acquired control of the entire economic apparatus of the globe? What if that privileged political and economic class then began to abuse that power for personal gain? And then, what if a mysterious figure emerged who was committed to a radical socialist ideology whose tracks were covered by a media that lied for him, and powerful corporations that were granted benefits as a by-product of this radical's seizure of control of the government?

OMFG yes. What an asshole! I stopped reading 2/3 into it, there was no point in continuing. It's all the government's fault for not letting us fuck over more muppets." Equity markets were designed to help companies fund expansion, not so multi-millionaires could insider trade and become billionaires.

Moreover, politicians think they can set up dueling competent regulators and there is no downside consequences.

Take for example a few years ago when the snowpack in the northern Rockies was way above normal. Congress considers the Army Corps of Engineers so competent to regulate watersheds they gave them the monopoly on building and running a series of massive water impoundments on the upper Missouri River. Congress also considers the Nuclear Regulatory Commission to be so competent they have been given the monopoly on approving where nuclear power plants are located and regulating their operation.

When the snowpack melted and the Army Corps of Engineers realized that the resulting flooding was a material danger to some of the dams they have on the Missouri, they had no choice but to open the flood gates. The wave of water going downriver threatened to overtop levies around two nuclear power plants that the NRC had permitted to be built along the river.

Because of two world-class monopoly bureaucracies, we came within a few inches of having a world-class nuclear power plant disaster. I never heard if any federal regulator lost his job. Certainly none went to jail. And of course the utility executives were safe as well, after all their power plants had been federally approved.

And your point is...what? You think the private sector would do better? No way. They would just build less safe reactors and then do even worse management of watersheds and waterways. I used to be a Cato acolyte, but that was before The Kochs took it all over. What's wrong is accountabilty in that there never was any.

The farce is strong with this one. What he utterly fails to understand is that regulators go after the low hanging fruit and leave the big fraud alone. It's the same as the beat cop who busts the guy walking down the street with a crack pipe in his hand and doesn't even try to figure out who supplied him. It's a fuck load easier to bust the guy on the street, and the cop gets to add another bust to his list of accomplishments. So if this article just said, "stop going after the little guy and focus on the massive fraud taking place at the top," he'd at least have something useful to say. But of course he's an industry shill so he just wants the cops to leave the guy with the crack pipe alone too.

What a stupid article. politicians are fucking puppets people. Their masters want a world with moar for them, less for you and no accountability for their actions while you go to jail for rolling through that stop sign on your bike (because you can't afford the fuel for a car).

The banks always get Alpha through their ability to borrow at lower costs than they lend ... they leverage. With the banks getting guaranteed Alpha, the rest of the world is getting guaranteed negative Alpha. The question for the so called rulers of the world, who rule through the banks is: How do you hide the fact that you are raping the world to get guaranteed Alpha? Simple:

1. Inflation ... 99% of the people have no clue how badly they are getting screwed through inflation (and the banks/government put out false statistics to defraud people who are smart enough to ask questions about inflation).

2. Use inflation to create Beta and go even farther than that to use emotional response to create big swings in Beta.

The stock market and the precious metals markets are perfect example of inflation fueled, manipulated Beta. A long term chart of the buying power or gold versus other commodities (not the dollar) would indicate that gold should be priced in the $650 to $850/oz range. However they ran it (through pure price manipulation) up to $2000. Now people think they are getting a deal at this level when the relative value is still in the $650 to $850 range.

The stock market on the other hand is"almost" pure multiple expansion. With a risk free rate of return in the area of 1.5% (on the 5-year), one would assume that utility stocks yielding 5% in dividends would get a decent following,. However, two things are happening that depress the price: a) those that control price are not bidding up the price. b) others who should know better are not buying because they believe that actual inflation is higher than the risk free rate or the rate of return on 5% dividend paying utilities. (real inflation is supposedly between 9% and 12% annually). So, they need to chase higher yield using leverage and cheap debt ... something that is not available to Joe Public, other than through the connected, criminal organizations.

Actually it does, but it taks it from the non-bank side and the use of inside information to create Alpha. See, the thing is that the bank side always has inside information (and other unfair advantages) so their entire business model is based on their ability to generate a guaranteed return (or Alpha). Alpha, per the article comes from having an unfair advantage.

In most cases it implies that the outcome is already determined demonstrably. In which case it's not even technically Alpha in that manner. Alpha still has a risk, even if it's a marginal one. Despite popular cliche's, there are sure things in the world, although their outcomes are predetermined, the consequences are best left to mystics and fortune tellers, as you can only speculate on the unintended consequences of stupidity and predetermination.

I find the tendency to conflate terms becoming more and more prevalent now that the Internet let's every idiot and moron have a voice that can reach even a marginally intelligent crowd...

Alpha, by definition, is not defined as "returns from unfair advantage/insider info" and the article misunderstands this. The assumption behind an efficient frontier is that volatility and returns have an inverse relationship. This does not hold if some participants have an unfair advantage and insider information.

In order to use insider information, an investor may have to trade earnings announcements and other more volatile section of a time series. In that case, he can generate excessive returns, but not necessarily generate a high alpha. Given that the security may be more volatile, according to CAPM, alpha may even look worse for such investor. However, for the insider, as they know why the movement occurs and in which direction, it is not a random variable, hence the assumptions of CAPM are not met. And higher volatility may not even be beneficial, a basket of low volatility equities may yield higher returns than a basket of high volatility equities.

The theoretical and practical limitations of CAPM are rather well documented at this point.

That is not what those terms mean, nor are the definitions from other contexts of them applicable here.

Everyone wants to blame the banks, but the government is the agency protecting the banks and corporations involved. The banks and corporations are only doing what is in their own best interest, which is what living human on the planet does from their own perspective. I do not like the bankers any more than you do, but I will not blame them for using their position to buy power that should not exist in the first place.

I can not equate Alpha to anything related to the field of finance. None of those pansy bitches have ever done a day's worth of hard work. They are incapable of being an Alpha, which is why they hide behind corporate logos and legal protections while they perpetrate their theft of value from the public in general.

"Because public confidence in the government’s control of public institutions like the market must be restored at all costs, even if that confidence is misplaced and even if the side-effects of that restoration are immense."

It was the side effects of the destruction of the government's control of public institutons like the market, that have generated immense side effects.

"This is exactly what politicians want from their regulatory efforts. They want a world of pure beta and zero alpha"

cry baby. you are talking about corporations which are public. in the way they are financed and in the way they effect the rest of us

now if you'd be talking about "Old Finance", i.e. those companies that were fully private, fully accountable to their shareholders, where partners knew that their company could fail and where good business practices were common, then I'd say you have a point. a big one

but this world was killed by Reagan, Tatcher, Clinton and so on. now we are practically talking about government arms in all except profits, which are shared between bonuses and shareholders

be honest and request a different, lighter kind of gov control for small business. and then set up shop on your own. Peter Shiff comes to mind

if not, don't cry you get the same treatment as the megabanks

the more public a company, the more transparent it should be. the public (that's us) wants to know

Basically you could boil this article down to a simple question: "Why won't they let me make risk free money?" Or, more succinctly: "Where is my money for nothing?"

As far as I am concerned, these regulatory requirements are (1) legal, since they don't go against the constitution or other laws; (2) ethical, since they force all participants involved to be responsible to the parties that they are beholden to; and (3) moral, since they provide a check on fraud, greed, and other malicious behavior. In my mind, that makes for a good law.